US Jan ethylene drops 7% on lower spot, feedstock prices

February 03/2011

(ICIS) -- US ethylene contracts for January settled down by 3.25
cents/lb ($72/tonne, ?52/tonne), market sources said on Wednesday, pressured by
lower spot prices and softer production costs last month. The decrease from
December, which put the monomer at 45.25 cents/lb for January, was widely
expected.

Market participants had predicted the monthly contract would drop by 2-4
cents/lb, citing lower spot prices and a drop in production costs throughout
January.

US spot ethylene in January traded at 41.500-44.000 cents/lb, dropping
from an average of 42.750-51.375 cents/lb in December, as assessed by ICIS. The
decrease in January stemmed from a more balanced market, following tighter
supply in the previous month.

Ethylene supply in November and December, particularly in the first half
of that month, was constrained because of a series of US cracker outages in the
fourth quarter. The drop in ethylene prices in January also reflected lower
production costs, resulting from a decline in ethane prices.